Television

Zee consolidated net skids 30% at Rs 2.21 billion in FY06

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MUMBAI: Zee Telefilms has posted a 30 per cent fall in consolidated net profit at Rs 2.21 billion for the fiscal ended 31 March 2006, as against Rs 3.17 billion a year ago.

Total income, however, rose to Rs 14.87 billion, up from Rs 13.3 billion.

For the last quarter of the fiscal, the company has reported a 27.2 per cent decline in consolidated net profit to Rs 675.5 million, as compared to Rs 925.7 million in the corresponding period of the previous year.

Total income, however, rose 10 per cent to Rs 4.1 billion, up from Rs 3.8 billion. The operating profit stood at Rs 761 million, after expensing of initial investments in new activities viz. Zee Telugu, Zee Smile, Zee Sports and others, amounting to Rs 525 million (13.2 per cent of consolidated revenues). As a result, consolidated operating profits of continuing businesses were Rs 1.28 billion. These are higher by 4.8 per cent as compared to the corresponding quarter last year. "The growth rate is subdued mainly due to investments in marketing focused on long-term buildup of mainline channels," Zee said in an official release.

On a standalone basis, Zee Telefilms has posted a 54.39 per cent fall in net profit to Rs 740.00 million for the year ended 31 March 2006 as compared to Rs 1.62 billion a year ago. Total Income has increased to Rs 8.84 billion, up from Rs 6.93 billion.

For the quarter ended 31 March 2006, the company reported a net loss of Rs 132.5 million as compared to a net profit of Rs 370.40 million a year ago. Total income, though, has increased to Rs 2.66 billion, up from Rs 1.75 billion during the period.

"The business of Zee Sports channel started on 8 June 2005. Zee Sports Ltd is re-organised in ZTL during current quarter and content gathering and space selling activity is retained in Zee Sports through an agency arrangement. Hence the standalone results of the company for current quarter and year are not comparable, said the company.

Commenting on the results, ZTL chairman Subhash Chandra said, "?We are pleased to report the continuing uptrend in advertising revenues and the strong recovery in our market position. You are aware of the hike in advertisement rates announced by Zee Network, which we are confident would start reflecting in FY2007 revenues.?

?The Board has also given approval for the hiving off of Zee?s direct consumer business. All DishTV operations would now be under a single corporate entity, bringing strategic clarity to this high growth business. This shall complete the restructuring agenda we had set for ourselves to create four focused, pure play, listed companies ready to exploit the vast emerging opportunities in each line of business. Subject to necessary approvals, this would result in streamlined operations in each area to build long-term shareholder value. It would also clear the ground for acquisitions and strategic or financial partners in the de-merged businesses, apart from unlocking shareholder value," said Chandra.

Commenting on the results, ZTL CEO Pradeep Guha said, ?While general entertainment (GE) as a genre has posted a 5 per cent decline in time spent, Zee TV has increased its viewership share from 16 per cent to 22 per cent along with a significant growth in time spent. Even within prime time Zee TV is the only channel to have grown, by 21 per cent, while its main competitors have dipped between 7 per cent and 12 per cent. Zee TV now conclusively occupies the second place in the pecking order of GE channels. With an average of 180 GRPs, we are fully 30 per cent higher than the number three GE channel, which continues to be behind Zee Cinema as well.?

"The cinema space has shown a decline except however for Zee Cinema, which has grown 7 per cent, with a channel share of 37 per cent. Recently we won the BCCI Cricket Rights for the one-day internationals to be held in non-ICC countries.This further strengthens the long term business prospects of the company,? Guha added.

The Board of Directors in its meeting held today, has taken on record the unaudited consolidated financial results of Zee Telefilms Limited and its subsidiaries for the quarter ended 31 March, 2006.

REVENUE STREAMS:

Zee's advertising revenues increased to Rs 1.96 billion, a 11.7 per cent growth as compared to the corresponding quarter last fiscal. "This growth in advertising revenues was a result of higher average rates on most of the network channels," the company said.

Overall subscription revenues at Rs 1.76 billion registered an increase of 5 per cent over the corresponding quarter last fiscal. Domestic pay revenues stood at Rs 717 million. Other sales and services grew to Rs 253 million. "From 2Q FY2006, we are recording the net income component of the trading of set top boxes as part of other income", the company said in the release.

EXPENDITURE:

Overall, the cost of goods and operations went up 44.8 per cent compared to a year-ago period, mainly due to investments made in new channels like Zee Sports, Zee Smile, Zee Telugu and Zee Jagran.

Personnel costs were 6.5 per cent higher than corresponding period last year. Other costs, particularly marketing expenses have increased by 24.4 per cent. As a result, total expenses were higher by 35 per cent.

From FY2006, the Company has accelerated its investments in the development and expansion of its network. "This has taken two directions. One, substantial marketing and content improvement initiatives have been put through and second, a number of new channels have been launched, to fill out our content offerings," states the company.

"As a result, Zee is in a phase in which the initial investments have been made and expensed fully, while the corresponding revenue build-up is to be realized in the next several quarters. The immediate impact is lowering of operating profits, which we hope to recover in successive quarters through increasing revenues and progressive reduction in costs," the company adds.



Zee's Q4 segment-wise revenues are indicated in the table below:

OTHER HIGHLIGHTS

Cable Network

Zee is looking forward to reinvention of its cable TV business and augmenting revenues. "The cable business is poised to pursue new technology opportunities with renewed focus including ?triple play? offerings, digitisation of cable, broadband and other similar initiatives that form the frontiers of cable today. Firm business plans are being given shape and field launch is due to commence shortly. There is more visibility now on the path of transition in the cable business towards digitalization. The recent regulatory and legal developments look set to lead to a roadmap for digitisation initially in the metros," the company said.

Direct Consumer Services business

The DTH subscriber numbers have crossed 900,000 and are growing at the rate of about 2,500 per day. "We are poised to execute market expansion strategies which would lead to a ramp up of subscription from the urban markets, based on value added services not presently available on cable," the company said.

At the Bombay Stock Exchange today, the Zee scrip opened at Rs 241.50 and closed at Rs 246.65, after touching a high of Rs 253 and a low of Rs 242.50.

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